For decades, Delaware’s legal framework for stockholder derivative claims targeted at corporate oversight—colloquially referred to as Caremark claims—was well-established. Caremark claims, which challenge failures to act rather than affirmative actions, could be brought against a company’s board of directors, but the bar for liability was high. For over 20 years prior to 2019, no such claims survived a motion to dismiss, reinforcing then-Chancellor William Allen’s statement in Caremark itself that such a theory is “possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment.”

However, there has been a noticeable increase in the frequency of such claims over the past four years, and five since 2019 have survived motions to dismiss. This trend carries significant implications for companies’ design of their oversight structures, as well as for the potential liability of directors and officers. It also has fueled greater stockholder use of the so-called “tools at hand”—demands to access corporate books and records to investigate whether to pursue burgeoning Caremark claims. Like the undercard before the title fight, books-and-records demands shape the landscape through which derivative actions are then litigated, and should be handled with care.

The Origins of Modern Director Oversight Claims